How to Handle Payment Processing If You're a High Risk Merchant

how to handle payment processing if a high risk merchant

Have you heard of high risk merchant processing?

When you’re starting a business, you know that you need to set up a merchant account to accept credit card payments. It’s essential to accept credit card payments. People just don’t carry cash, and when they do, it’s in small amounts.

Yet, some businesses don’t qualify to open up a merchant account because they’re considered to be high risk merchants. These can be businesses in certain industries or sell high-dollar items.

If you find yourself getting turned down for payment accounts, you do have options. Keep reading to discover what high risk merchant accounts are and what your options are to accept credit card payments.

What’s a High Risk Merchant?

Let’s talk about how credit card payments work. When people use a debit card or a credit card for payment, there are a number of companies involved in the transaction. When a card is swiped or a chip is read, the information goes from the payment terminal to the card network.

Card networks are Visa, Mastercard, or American Express. The card network will then check with your bank to make sure there are enough funds or credit available in the account. The bank will then transfer the money through the network to deposit the money into your account.

The payment processor will charge a fee for the transaction.

When someone pays with cash, it’s much simpler. The customer has cash, they hand it over, and you give them change (or not). It’s easy and straightforward.

There are times when there are fraudulent transactions or refunds need to be given back to customers. When these things happen, banks lose money. To limit their risk, they classified certain businesses as high risk merchants.

These are industries like dating sites, adult sites, online casinos, betting sites, bail bond companies, or cryptocurrency sites. These types of businesses have a high percentage of fraud and illegal activity.

There are also companies like furniture stores and travel companies that are considered high risk. 

Same with new businesses or businesses with poor credit. They all pose risks to banks, so banks will deny them.

How Can You Get a Payment Account as a High Risk Merchant?

You usually have a lot of easy options when you want to open a merchant account. You can contact your bank or set up accounts on PayPal or Square. If you have an ecommerce store and have your store hosted on Shopify, you can get an account there.

However, it’s not that easy if you’re tagged as a high risk merchant. These options won’t be available to you. You have to find a bank or payment processor that works with high risk merchants. They do exist, but since they know that you’re in a pinch, they are likely to charge exorbitant fees.

You’ll have to pay higher transaction rates and you’ll have chargeback fees to pay. What is a chargeback fee? It is a fee a merchant's bank charges when a merchant receives a chargeback. This can range from $15-$50, with high risk merchants paying even more, thus you have to prove that you’re worthy of a high risk merchant account. There’s a much higher bar to get approved.

Finding a High Risk Merchant

If you want to find a high risk merchant, be prepared to shop around. You want to compare rates, the application process, and the time it takes to get approved.

You’ll find that some high risk payment processors will work with some industries that are considered high risk. They may work with travel companies, but they won’t work with dating sites that carry higher risk. 

Others would be willing to work with all industries.

Get a Merchant Account Approved

Once you find a bank to work with, you need to make sure that you can get approved for an account. It’s not a sure thing to get approved, even if a bank or processor accepts high-risk merchants.

They’re going to take on that risk, which means that they’re going to do everything that they can to vet you and your business.

Check Your Finances

The first thing you want to do is look at your own finances over the last 6-12 months. Ideally, you want to be able to show stable income and growth in this period.

What if you’re a brand new business looking for a high-risk merchant account? You’ll want to present a business plan. That may seem extreme since you’re not looking for a loan. Remember, high risk merchants are considered high risk for a reason.

The more you can show that your business isn’t a real risk, the better. Be prepared to show other documents like privacy security and customer service policies. These are important because they show how you handle customer data and customer issues like refunds.

When you open up your high risk merchant account, you want to keep a clean record for the first 6 months or so. You don’t want to have any chargebacks or fraudulent payments. A clean financial record may open the door for a lower rate of interest.

Accepting Payments as a High Risk Merchant

No matter what type of business you’re in, you need to be able to accept credit card payments. In this day and age, people don’t carry around much cash.

For high risk merchants, though, it’s not that easy to accept credit card payments. You may not have many options to go with when you have a high risk business. You do need to do your research and put your business in the best position possible to get approved.

You want to make sure that you have a business plan, you show a path to profitability, and you limit your chargebacks. 


Would you like more financial articles to help you get ahead in your business, even as a high risk merchant? Come back to this site often for a broad range of fintech, payment and finance articles. Visit the Finance and Tech sections of the Bootstrap Business Blog to learn more about fintech, finances, payroll, and business loans.

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